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Everything comes with an expiry period and that includes your days of being actively employed. You are earning a regular monthly income today but some day in the future, it is likely to cease. Retirement planning is therefore an essential part of financial planning, making sure that you receive a regular income even after you stop working during your sunset years. If you are one among the many who think that you are too early to start your retirement planning, you are on the wrong side. The earlier you start, the more you can do, and the more time you get to let your money grow.
A report by the UN reveals that that India is facing an ageing “time bomb” as the “number of old people will triple by 2050”. No wonder, just like any other domains, the banking and insurance sector also is trying to address the possible issues of India’s ageing population by offering customised products and solutions. Pension plans are one such.
Understanding Pension Plans:
Pension plans are investment plans that generate a regular income flow for you when you are retired. Apart from the government-offered schemes, pension plans are offered by insurance companies where you need to invest either a lump sum or annual premium over a specified period, in return for a regular income after a certain point of time. Apart from retirement benefits, pension plans offers an additional tax advantage under Section 80CCC.
Life Annuity
Under the life annuity plan, pension will be paid to you throughout your life. If you opt to choose the ‘with spouse’ option, your spouse will continue to receive pension after your demise.
Immediate Annuity:
In this plan, you do not need to wait for getting the returns, and the pension starts right away as fixed monthly installments, once you purchase the plan with a lump sum payment.
Annuity Certain
In an annuity certain pension plan, the annuity amount is paid for a certain number of years. You can choose the number of years depending on your individual requirements. If you happen to die before the term ends, the remaining annuity is paid to the beneficiary.
Deferred Annuity
In this plan, the premium that you pay is pooled and invested to form a corpus. It is then paid back to you after a period as specified by you or after you turn 60 years old. This plan suits young working individuals who are looking at long term retirement planning options.
Guaranteed Period Annuity
Under a guaranteed period annuity plan, pension is provided for the period and beyond. For example, if you have a guaranteed annuity plan and you happen to expire during mid-term, the beneficiary would be paid the remaining annuity. If you survive the term, you continue to receive pension for life.
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